The Japanese Real Estate Investment Market 2017
October 2017
Otemachi Financial City Grand Cube,1-9-2 Otemachi, Chiyoda-ku, Tokyo 100-0004, Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Population movements in Japan
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Office market
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 2
Population movements in Japan
The decline in number of households was not confirmed by the national census in 2015. The population of people 65 years or older is expected to level off in 2025 and head downwards from 2040.
In 2015, depopulation was observed for the first time in Japan, based on the national census.
Population and households in Japan
Forecast →← ActualPopulation(thousand)
Households(thousand)
Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: Population forecast is based on the data of population census in 2015.Note 2: The solid line shows the actual households based on the population census and dotted line shows the predicted households based on the population census in 2010.Note 3: Median-fertility (median-mortality) projection is used in population and household forecast.
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065
65-
15-64
0-14
households
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 3
Population movements in Japan
The population of foreigners is drastically increasing in Greater Tokyo and slightly increasing in the Aichi prefectures and prefectures with regional core cities.
The population is increasing only in Greater Tokyo, Aichi prefecture, Fukuoka prefecture and Okinawa prefecture. The same tendency can be seen in the increase/decrease of foreigners population.
Increase/decrease in population of each prefecture from FY 2010 to 2015.
50
-150
-100
-50
200
300
250
150
400
350
0
100
Hok
kaid
oAo
mor
iIw
ate
Ehim
eKo
uchi
Akita
Miy
agi
Fuku
oka
Nag
asak
i
Fuku
shim
aYa
mag
ata
Kum
amot
oO
ita
Toch
igi
Ibar
aki
Miy
azak
iKa
gosh
ima
Saita
ma
Gun
ma
Oki
naw
a
Toky
oC
hiba
Niig
ata
Kana
gaw
a
Ishi
kaw
aTo
yam
a
Osa
kaH
yogo
Yam
anas
hiFu
kui
Nar
aW
akay
ama
Gifu
Nag
ano
Totto
riSh
iman
e
Aich
iSh
izuo
ka
Oka
yam
aH
irosh
ima
Shig
aM
ie
Yam
aguc
hiTo
kush
ima
Kyot
o
Kaga
wa
Saga
Increase/decrease in population of foreigners
Increase/decrease in population of Japanese
Population(thousand)
Source: National Institution of Population and Social Security Research and MIC “Population Census”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 4
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Tokyo Kanagawa Saitama Chiba
Population movements in Greater Tokyo
It is anticipated that the population in the Greater Tokyo has reached to its peak level in 2015. On the other hand, the number of households is projected to increase until 2025.
In Greater Tokyo, the population has peaked out; however, the number of households is expected to increase for 10 years.
Population of Greater Tokyo
Forecast →← Actual Forecast →← Actual
Number of households in Greater TokyoPopulation(thousand)
Households(thousand)
Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: Median-fertility (median-mortality) projection is used for population forecast. Note 2: Forecast of population and the number of households are based on the “Population Census” in 2010. However, the data of 2015 is based on the population census in 2015.
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035
Tokyo Kanagawa Saitama Chiba
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 5
71,934
100,105
-50,000
0
50,000
100,000
150,000
200,000
250,000
300,000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
foreigners(by"Zairyu-Gaikokujin-Tokei") foreigners(by"Jumin-Kihon-Daicho") Japanese
Population movements in Greater TokyoThe population of Greater Tokyo area is rising, but 40% or more of increased population is accounted to foreigners. In the future, it seems that the population growth of Greater Tokyo will be supported by the foreigners.
Incremental population growth of foreign and Japanese residents in Greater Tokyo
Sources: “Statistics on Foreign national residents” compiled by Ministry of Justice and “Basic resident registers” compiled by Ministry of Internal Affairs and CommunicationsNote 1: The population of foreign national is based on the Statistics on Foreign national residents till 2011. In 2012 and later, population is based on the Basic resident registration.Note 2: The statistics of Foreign nationals used the data as of the end of December. Till 2012, the Basic resident registration used the data as of March 31 of the year. Since 2013, it uses the data of population as on January 1 of the following year.
The foreign population dipped temporarily due to the global financial crisis and aftermath of the 2011 earthquake, but has been rising in line with economic recovery.
Foreigners accounted for 38.6% of the population growth in this area.
41.8%
58.2%
Population
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 6
-150
-100
-50
0
50
100
150
200
250
Tokyo Kanagawa Chiba Saitama
Population movements in Greater Tokyo
The number of net inflows in 2016 recovered to the level of 2005 or 2006. The inflow is projected to continue.
The population influx into the Greater Tokyo is continuing. However, about 60% of population is the influx to Greater Tokyo. After an earthquake in 2016, the population influx to Greater Tokyo area fell below than previous year for the first time.
Net inflows of people to Greater Tokyo
Source: MIC “Jyumin Kihon Daichou Jinkou Idou Houkoku”
Net increase
Net decrease
Population(thousand)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 7
Population movements in Greater Tokyo
However, the number of single-person households is expected to peak out in 2030. Households of couple with children will reduce from 2020, while the households of only couple or children with single
parent will slightly increase.
Amongst the number of households in Greater Tokyo, the tendency of single-person household to occupy higher ratio is expected to continue in the future.
Number of households by family composition in Greater Tokyo
Forecast →← ActualHouseholds(thousand)
Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: The solid line shows the actual value based on the population census. The dotted line shows the predicted value based on the data of population census in 2010.Note 2: Median-fertility (median-mortality) projection is used for household forecast.
One-person
Couple-only
Couple-and-child(ren)
One-parent-and-child(ren)
Other
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
1995 2000 2005 2010 2015 2020 2025 2030 2035
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 8
Population movements in central Tokyo
Population is expected to increase in the Chuo, Koto, and Minato wards. The national census in 2015 confirmed the drastic increase in the population in the Chuo ward, Minato ward, Chiyoda ward and Taito
ward.
The population in Tokyo’s 23 wards is projected to increase over the longer term only in the three wards along Tokyo Bay.
←Actual Forecast→Ward 2010 2015 2020 2025 2030 2035 2040Chuo 100.0 114.9 115.3 116.6 116.8 116.1 114.4 Koto 100.0 108.1 104.4 106.8 108.2 108.8 108.5
Minato 100.0 118.7 107.0 107.9 107.8 107.0 105.2 Shinjuku 100.0 102.2 104.4 104.8 104.4 103.4 101.6 Nerima 100.0 100.8 105.1 105.3 104.5 102.9 100.6 Sumida 100.0 103.6 101.7 102.6 102.7 102.0 100.6 Arakawa 100.0 104.0 103.0 102.8 102.2 101.2 99.7 Chiyoda 100.0 123.8 106.9 106.1 104.6 102.2 99.3 Setagaya 100.0 102.7 102.7 102.4 101.5 100.0 97.9
Shinagawa 100.0 105.9 102.9 102.7 101.7 100.0 97.8 Edogawa 100.0 100.2 101.7 101.1 99.8 98.2 96.2 Bunkyo 100.0 106.4 101.9 101.3 100.1 98.2 95.7 Toshima 100.0 102.2 106.1 104.5 102.2 99.2 95.3
Ota 100.0 103.5 101.6 100.8 99.4 97.5 95.1 Itabashi 100.0 104.9 100.5 99.1 97.2 94.7 91.8 Meguro 100.0 103.6 100.2 98.8 96.8 94.1 91.1
Taito 100.0 112.8 99.5 97.7 95.4 92.6 89.4 Shibuya 100.0 109.9 98.8 96.6 93.9 90.9 87.4 Nakano 100.0 104.4 97.7 95.5 92.9 89.8 86.2
Kita 100.0 101.6 97.6 95.1 92.2 89.0 85.5 Suginami 100.0 102.8 97.6 95.1 92.0 88.5 84.5
Katsushika 100.0 100.2 95.7 92.4 88.7 84.8 80.8 Adachi 100.0 98.2 95.2 91.6 87.5 83.1 78.7
Population growth trends in the 23 wards of Tokyo (assuming the population of each ward is 100 in 2010)
Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: Forecast of population is based on the data of “Population Census” in 2010. Median-fertility (median-mortality) projection is used for population forecast.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 9
Population aging in central Tokyo
In 2015, one in four people is over 65 years old in just 4 wards; however, the same situation will occur in 7 wards in 2025 and 21 wards in 2035.
Population aging by ward
←Actual Forecast→Ward 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Sumida 13.1% 15.5% 18.1% 20.2% 21.4% 21.9% 21.1% 21.6% 22.7% 24.8% 28.1%Arakawa 13.7% 16.5% 18.9% 20.8% 21.9% 23.4% 23.8% 23.5% 24.1% 25.6% 28.4%
Koto 9.4% 12.2% 15.2% 17.3% 19.1% 20.5% 20.0% 20.5% 21.7% 24.5% 28.5%Shinjuku 12.6% 15.3% 17.1% 18.7% 19.1% 21.0% 21.6% 22.0% 23.4% 25.7% 29.3%Edogawa 8.1% 9.9% 12.8% 15.4% 18.1% 20.6% 21.4% 21.7% 23.3% 26.1% 29.5%
Shinagawa 11.6% 14.5% 17.4% 18.0% 19.4% 21.5% 22.4% 22.8% 24.1% 26.7% 30.8%Bunkyo 13.9% 16.4% 17.9% 18.3% 18.9% 20.9% 21.7% 22.6% 24.6% 27.3% 31.0%
Ota 11.6% 14.1% 16.3% 18.4% 20.4% 23.0% 24.1% 24.6% 26.0% 28.4% 31.7%Setagaya 11.1% 13.4% 16.1% 17.3% 18.3% 20.3% 21.2% 22.3% 24.6% 27.9% 31.8%
Taito 15.9% 18.8% 21.1% 23.1% 23.6% 25.1% 25.4% 25.2% 26.0% 28.3% 32.2%Kita 12.7% 16.0% 19.3% 21.6% 24.0% 26.7% 27.7% 27.6% 28.2% 29.8% 32.8%
Chiyoda 16.6% 20.2% 20.9% 20.2% 19.2% 19.7% 20.5% 21.7% 24.3% 27.9% 32.8%Itabashi 10.0% 12.7% 16.3% 19.3% 21.3% 24.3% 25.8% 26.4% 27.8% 29.8% 33.1%Chuo 15.4% 17.6% 18.3% 16.3% 15.9% 16.9% 17.9% 19.0% 22.0% 26.8% 33.4%
Meguro 12.5% 14.8% 17.4% 18.6% 19.6% 22.2% 23.3% 24.4% 26.6% 29.5% 33.5%Nakano 12.1% 14.6% 16.3% 18.2% 19.9% 22.5% 23.8% 24.8% 26.8% 29.7% 33.8%Toshima 12.8% 15.7% 18.4% 21.1% 19.3% 19.8% 21.6% 23.1% 25.5% 29.0% 34.3%Minato 13.7% 16.3% 17.9% 17.8% 17.2% 18.3% 19.5% 21.0% 24.0% 28.4% 34.3%
Katsushika 10.6% 13.2% 16.6% 19.9% 22.0% 24.8% 26.1% 26.8% 28.4% 31.1% 34.5%Shibuya 12.6% 15.2% 16.9% 18.5% 19.6% 21.9% 23.3% 24.6% 27.3% 31.0% 35.6%Adachi 9.3% 11.9% 15.9% 19.9% 22.2% 25.4% 26.8% 27.3% 28.9% 31.8% 35.7%Nerima 9.5% 12.2% 15.4% 20.3% 19.3% 23.1% 25.5% 27.7% 30.8% 34.6% 39.0%
Suginami 11.8% 14.4% 16.8% 18.8% 23.1% 26.3% 28.2% 29.8% 32.4% 35.6% 39.6%Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: Forecast of population is based on the data of “Population Census” in 2010. Median-fertility (median-mortality) projection is used for population forecast.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 10
Percentage of foreigners in central Tokyo
The percentage of foreigners in Tokyo are increasing, and there is a ward where the ratio is over 10%.
Percentage of foreigners in the 23 wards of Tokyo (top 5)
The percentage in Shinjuku (over 10%) is the highest in Tokyo, and the percentages of Toshima and Arakawa are over 8%.
In the other hand, the 23 wards as a whole have foreigners as 4.2% of their total population, indicating that the situation of each ward is quite different.
Source: MICOn January 1 of every year
23 wards
Shinjuku
Toshima
ArakawaMinato
Taito
0%
2%
4%
6%
8%
10%
12%
14%
2013 2014 2015 2016 2017
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 11
Population movement in central Tokyo
The increase in Tokyo’s population has consistently outpaced estimates
Actual and projected population movement in Tokyo
1995 2000 2005 2010 2015
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Forecast in 2010Forecast in 2005Forecast in 2000
Actual data
Population(thousand)
Source: National Institution of Population and Social Security Research and MIC “Population Census”Note 1: Median-fertility (median-mortality) projectionNote 2: Forecast of population and the number of households are based on the “Population Census” in 2010, while the preliminary data in the “Population Census” in 2015 is basis for 2015.
Copyright (C) 2014 Nomura Research Institute. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Population movements in Japan
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Office market
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 13
India
KoreaUK
0
5,000
10,000
15,000
20,000
25,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
(Billion USD)
US
China
Japan
Macro fundamentals of Japan
Entering the 2020s, Japan will remain at third place globally in nominal GDP, ahead of developing countries such as India.
Japan remains one of the largest economies in the world and should not be ignored as an investment target
Source: Compiled by NRI from IMF “World Economic Outlook Database (2017 Apr.)” data
Nominal GDP of major countries
Forecast →←Actual
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 14
China
India
Japan
KoreaUKUS
-10.0
-5.0
0.0
5.0
10.0
15.0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
(%)
Macro fundamentals of Japan
IMF forecasts estimate Japan’s GDP growth rate at around 0.5% for the next 5 years.
Japan’s economic growth is low compared to other major economies and high growth going forward looks unlikely
Real GDP growth rate of major economies
←Actual Estimate→
Source: Compiled by NRI from IMF “World Economic Outlook Database (2017 Apr.)” data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 15
Macro fundamentals of Japan
Steady trend of private consumption and capital investment is the factor of uplifting.
Recently, positive growth continued over several periods and domestic demand is driving that positive growth.
(%)
Quarterly real GDP growth and contributions to changes (seasonally adjusted series, YoY)
Source: Compiled by NRI from Cabinet Office “SNA (National Accounts of Japan)” data
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
2010 2011 2012 2013 2014 2015 2016 2017
Private Consumption
Private Investment
Public Demand
Exports
Imports
Real GDP Growth
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 16
Macro fundamentals of Japan
On the other hand, inflation rate has become stagnant and prices are rising slowly.
Although the core CPI turned positive from a year earlier, Bank of Japan core CPI excluding the fresh foods and energy continues to decline. Most recently, it shifted to negative territory.
Sources: Compiled by NRI from Ministry of Internal Affairs and Communications “Consumer Price Index (CPI)”
Inflation targetset by BOJ
Year-on-year comparison for the same month of the consumer price index
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 17
Macro fundamentals of Japan
Since quantitative and qualitative easing in April 2013, the BOJ has been massively expanding the money supply and purchasing JGBs.
The Bank of Japan continues a large-scale qualitative and quantitative accommodating policy
YoY change of money supply (Average balance) BOJ’s holdings of JGBs
Source: Compiled by NRI from Bank of Japan “Monetary Base” data
(Trillion Yen)
Source: Compiled by NRI from Bank of Japan “BOJ Accounts” data
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60% Monetary Base Money Stock
0
100
200
300
400
500
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 18
In continuation of the negative interest rate policy of January 2016, the Bank of Japan introduced a long-term interest rate policy on September 2016 and announced a policy to buy long-term bond that shifts the long-term interest rate to 0%.
Although the short-term interest rates are still negative, the long-term interest rates are shifting towards positive territory.
Short-term interest rate (unsecured call rate) (Each end of the month) Long-term interest rate (10y-JGB) (Each end of the month)
Source: Compiled by NRI from Bank of Japan “Short-term Money Market Rates” data Source: Compiled by NRI from MOF “JGBs Interest Rate” data
-0.20
-0.10
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
-0.50
0.00
0.50
1.00
1.50
2.00
2.50 (%) (%)
Macro fundamentals of Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 19
Macro fundamentals of Japan
Recent yen strength reflects mainly fading perceptions of a US rate hike, a risk-off mode by investors, and a Japanese current account surplus
In the middle of 2016, the exchange rate of yen is continuously moving without any sense of direction.
Yen-dollar exchange rate (each end of the month)
(USDJPY=X)
Source: Compiled by NRI from IMF “Exchange Rate Data” data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 20
Macro fundamentals of Japan
In the first half of 2017, the current account surplus was at the highest for the first time in 10 years.
Trade balance return to its basic profitable tendency and the current account surplus tends to expand.
Current account balance
Source: Compiled by NRI from MOF “Balance of Payments” data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 21
Macro fundamentals of Japan
The government debt to GDP ratio has becoming flat in recent years due to a reduction in the primary balance deficit and restraint of interest payments due to monetary easing as well as the increase in nominal GDP that is the denominator of the ratio.
Government debt has plateaued at high level, while a primary fiscal balance surplus is not in sight.
Government debt to GDP ratio Primary balance to GDP ratio
Estimate →←Actual Estimate →←Actual-12
-10
-8
-6
-4
-2
0
2
4(%) Japan United States United Kingdom
Source: Compiled by NRI from IMF “World Economic Outlook Database (2017 Apr.)” data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 22
Macro fundamentals of Japan
Tokyo continues to be the world’s largest city in terms of population and GDP.
Population/GDP forecast for 2025 (Top 15 cities in terms of population or GDP)
Source:Compiled by NRI based on UN “World Urbanization Prospects” and Euromonitor data.
2025 nominal GDPby city
(in billion USD)
2025 populationby city
( in thousands)
*No data for GDP of Dhaka and Kinshasa
Tokyo
Delhi
ShanghaiBeijing
Mumbai
Dhaka
Mexico CitySão Paulo
CairoKarachi
Osaka
Lagos
New York
Kolkata
Kinshasa0
500
1000
1500
2000
2500
0 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 23
Beijing, 56
Tokyo, 36
Paris, 17
New York, 15
London, 14
Seoul, 12Shanghai, 8
Osaka, 7HongKong, 6
Houston, 5Others, 324
Macro fundamentals of Japan
Tokyo has the second largest concentration of world-class enterprises.
Number of HQ of Fortune Global 500 companies by city (2017) Fortune Global 500 companies in Tokyo (within top 200)
Source: Compiled by NRI from Fortune “Fortune Global 500 (2017)” data.
Rank Company Revenue(Mil. USD)
29 Honda Motor 129,198
33 Japan Post Holdings 122,990
50 Nippon Telegraph & Telephone 105,128
71 Hitachi 84,558
72 SoftBank Group 82,892
105 Sony 70,170
116 Marubeni 65,792
127 JXTG Holdings 63,629
142 Dai-ichi Life Holdings 59,590
145 Mitsubishi 59,303
164 Mitsubishi UFJ Financial Group 55,185
167 Seven & I Holdings 53,858
185 Tokyo Electric Power 49,446
188 MS&AD Insurance Group Holdings 49,239
193 Tokio Marine Holdings 48,292
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 24
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Population movements in Japan
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Office market
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 25
611 305 676 8951,772 2,031 1,679
628 439 604 7921,555
2,237 2,080 2,066 2,3190
2,236
3,307
4,439
5,159
6,242 7,205
2,2101,359 539
1,549
1,791
2,1563,433 3,302 2,510
0
2,000
4,000
6,000
8,000
10,000
FY20
01
FY20
02
FY20
03
FY20
04
FY20
05
FY20
06
FY20
07
FY20
08
FY20
09
FY20
10
FY20
11
FY20
12
FY20
13
FY20
14
FY20
15
FY20
16
Others J-REIT
Acquisitions of securitized real estate decreased in two consecutive years.
Although it was on a recovery trend after the bankruptcy of Lehman brothers, the complexity level of acquisition was going up along with the rise in prices of real estate, and it seems that it turned to a declining trend.
Overview of real estate investment market in Japan
Acquisitions of securitized real estatebillion yen
Source: Compiled by NRI from MLIT “Real Estate Securitization” data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 26
Office, 38.2%
Residential, 14.3%
Retail, 16.0%
Logistics, 15.4%
Hotel, 8.6%
Health care, 1.0%
composite facilities,
2.4%
Others, 4.1%
1,611710
1,516 1,7282,194 2,124 2,503
891 556 768 5121,092 1,501
2,3281,803 1,598
267
552
686808
1,293 1,5891,321
348235
441406
550603
784
614564161
270
404
835
7901,107 981
479
289252
309
452
788
758
773730615
746
550
770
419662
0
2,000
4,000
6,000
8,000
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016
Office Residential Retail Logistics Hotel Health care composite facilities Others
Structure in which office, residential, commercial and logistics occupy the 80% of transaction value will continue.
Because of the sudden increase in the inbound marketing, the hotel investment is also becoming popular as one of the main objectives.
Overview of real estate investment market in Japan
Acquisitions of securitized real estate by asset classbillion yen
Allocation of securitized real estate by asset classin the past 5 years
Source: Compiled by NRI from MLIT “Survey of the Current State of Real Estate Securitization” dataNote: Because the usage of securitizations that require actual TMK is unclear, they have not been included after 2001. Because of this, the yearly totals and amounts will not match up with the documents
cited for this entry.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 27
41.9%
51.9%
53.0%
66.0%
58.8%
47.9%
51.9%
45.9%
33.8%
38.0%
12.1%
12.7%
10.5%
11.8%
12.0%
15.3%
15.8%
17.5%
17.3%
18.1%
10.5%
8.8%
8.4%
6.9%
8.0%
9.5%
10.0%
10.2%
13.8%
12.9%
6.4%
5.5%
6.9%
4.0%
5.1%
3.7%
5.8%
5.1%
6.9%
23.1%
17.4%
17.2%
12.0%
14.9%
19.9%
15.2%
17.0%
26.0%
20.8%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
FY2007
FY2008
FY2009
FY2010
FY2011
FY2012
FY2013
FY2014
FY2015
FY2016
Tokyo Greater Tokyo Osaka Nagoya Fukuoka Others
The ratio of Greater Tokyo area was on a declining trend after FY2010.However, It has increased its number since FY2016.
About the two-third of securitized properties focused on Greater Tokyo in FY 2010. However, it declined to about the one third of it in FY 2015.
Composition ratio of Tokyo reversed in FY 2016 and has gone up by 4%.
Overview of real estate investment market in Japan
Number of properties securitized by region
Source: Compiled by NRI from MLIT “Survey of the Current State of Real Estate Securitization” dataNote: Securitization of TMK properties is not included because their use is unknown.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 28
4.1 Total Return
13.8
-7.5
8.8
7.2
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
2002
/12
2003
/6
2003
/12
2004
/6
2004
/12
2005
/6
2005
/12
2006
/6
2006
/12
2007
/6
2007
/12
2008
/6
2008
/12
2009
/6
2009
/12
2010
/6
2010
/12
2011
/6
2011
/12
2012
/6
2012
/12
2013
/6
2013
/12
2014
/6
2014
/12
2015
/6
2015
/12
2016
/6
2016
/12
The total return peaked at 8.8% at the end of 2015 and then, it started declining.
After the recovery from the bankruptcy of Lehman Brothers and the total return gone up through the Abenomics, the real estate investment market is moving to the next cycle.
Overview of real estate investment market in Japan
Source: MCI Real Estate - IPD
Performance trend in Japan
Transition of total return in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 29
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Oct
-03
Apr-
04
Oct
-04
Apr-
05
Oct
-05
Apr-
06
Oct
-06
Apr-
07
Oct
-07
Apr-
08
Oct
-08
Apr-
09
Oct
-09
Apr-
10
Oct
-10
Apr-
11
Oct
-11
Apr-
12
Oct
-12
Apr-
13
Oct
-13
Apr-
14
Oct
-14
Apr-
15
Oct
-15
Apr-
16
Oct
-16
Apr-
17
Office Tokyo CBD Office Osaka CBD Retail Tokyo Residential Tokyo Logistics Tokyo Multi
On the other hand, the cap rate is declining.
Overview of real estate investment market in Japan
Cap rates in Japan for major investment areas
Source: Compiled by NRI from Japan Real Estate Institute “Japanese Real Estate Investor Survey” data.
Office TokyoRetail Tokyo
Residential TokyoLogistics Tokyo MultiOffice Osaka
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 30
-40
-30
-20
-10
0
10
20
30
2000
/320
00/9
2001
/320
01/9
2002
/320
02/9
2003
/320
03/9
2004
/320
04/9
2005
/320
05/9
2006
/320
06/9
2007
/320
07/9
2008
/320
08/9
2009
/320
09/9
2010
/320
10/9
2011
/320
11/9
2012
/320
12/9
2013
/320
13/9
2014
/320
14/9
2015
/320
15/9
2016
/320
16/9
2017
/3
Loose
Tight
Fierce competition among commercial banks continues to help boost prices.
Banks’ lending attitude toward the real estate industry is the most lenient since 2000 and the standard of the time of the global financial crisis in 2007 is exceeded. Many people in Japan believe there are too many banks, and spreads continue to fall with covenants loosening.
Along with mega-banks and other major banks, regional mid-tier banks are entering the market, so conditions look unlikely to change over the near term.
Overview of real estate investment market in Japan
Financial institutions’ lending attitude DI toward the real estate industry
Source:Compiled by NRI from BOJ“TANKAN (Figures by Industry)” data.
Copyright(C) 2017 Nomura Research Institute, Ltd. All rights reserved.
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 32
Office floor space shares by major region
Office market
Tokyo area holds 61% of Japan’s office rental market.
Japan has a stock of around 106 million ㎡ of available office rental space. The Tokyo area holds an overwhelming share of the market at 64 million ㎡, comprising 61% of the total.
Source: JREI “The Annual Japanese Office Buildings Survey”Note: Data is as of January 2016.Note: The survey focuses on the central area of each city.Note: Properties less than 3,000 square meters are excluded.
61.0%
4.6%1.0% 1.8%
14.5%
1.7% 1.0%5.5%
3.2% 2.3% 2.0% 1.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Tokyo Yokohama Saitama Chiba Osaka Kobe Kyoto Nagoya Fukuoka Sapporo Sendai Hiroshima
(5.00million ㎡)
(63.94million ㎡)
(1.03million ㎡)(1.95million ㎡)
(15.91million ㎡)
(1.85million ㎡)(1.12million ㎡)
(5.87million ㎡)(3.57million ㎡)
(2.54million ㎡)(2.23million ㎡)
(1.72million ㎡)
Tokyo Metropolitan Area67.4%
12 major cities106.73million ㎡
Osaka Area17.7%
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 33
Tokyo’s CBD has an accumulation of office buildings and is concentrated in an area of 5km square, concentrated in Chiyoda, Chuo, Minato, Shibuya, and Shinjuku wards.
Tokyo’s Central Business District (CBD) is concentrated in five wards
30 km
30 km
Tokyo13.22 million people
Kanagawa9.07 million people
Saitama7.15 million people
Chiba6.15 milion people
SetagayaMinato
ItabashiKita
Adachi
Katsushika
Edogawa
Koto
SumidaTaito
ArakawaToshima
Bunkyo
Shibuya
ShinjukuChiyoda
Chuo
Meguro
Shinagawa
Ohta
Nakano
Nerima
Suginami
Office market
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 34
Monthly (Jan 2013 –Jan 2017)
Source: Miki Shoji Co., Ltd.
Office market
Vacancy rates in the Tokyo office market have been improving for over four consecutive years.
Yearly (1998 - 2016)Vacancy rate movement in Tokyo CBD
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Chiyoda
Chuo
Minato
Shinjyuku
Shibuya
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Jan-
13Ap
r-13
Jul-1
3O
ct-1
3Ja
n-14
Apr-
14Ju
l-14
Oct
-14
Jan-
15Ap
r-15
Jul-1
5O
ct-1
5Ja
n-16
Apr-
16Ju
l-16
Oct
-16
Jan-
17
Chiyoda
Chuo
Minato
Shinjyuku
Shibuya
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 35
Monthly (Jan 2013 – Jan 2017)
Source: Miki Shoji Co., Ltd.
Note: One tsubo is 3.3 square meters.
Office market
Rents entered an upward phase from around 2013 in all 5 Tokyo wards.
Yearly (1999 – 2017)Rent trends in Tokyo CBD (yen/tsubo per month)
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
26,000
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
(yen/tsubo)
Chiyoda
Chuo
Minato
Shinjuku
Shibuya
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
26,000
Jan-
13M
ay-1
3Se
p-13
Jan-
14M
ay-1
4Se
p-14
Jan-
15M
ay-1
5Se
p-15
Jan-
16M
ay-1
6Se
p-16
Jan-
17
(yen/tsubo)
Chiyoda
Chuo
Minato
Shinjuku
Shibuya
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 36
3,818 3,8353,660
3,461
3,243
2,020 1,988
1,884
1,467 1,474 1,415
3,648 3,643 3,565 3,498
2,083 2,078 2,035 1,998
1,5391,533 1,501 1,473
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
1990 1995 2000 2005 2010 2015 2020 2025
23区
5区
3区
(千人)
The number of Tokyo’s office workers is declining at a fast rate than published forecasts.
Trend and forecast of office worker numbers in Tokyo
Office market
Central 3 wards(Chiyoda, Chuo, Minato)
Central 5 wards(Chiyoda, Chuo, Minato, Shibuya, Shinjuku)
23 wards
(1,000 people)
Forecast compiled in December 2010 (same for 5 and 3 wards)
Data announced in October 2013 (same for 5 and 3 wards)
Source: MIC “Population Census” and Tokyo Metropolitan Government “Shugyosha no Yosoku”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 37
14.8%
15.8%16.4%
11.8% 11.8%11.6%
13.5%
15.0%
15.6%
8.9% 8.7% 8.4%
6.2% 6.2% 6.1%
15.4%
15.3% 15.3%
11.5% 11.4% 11.3% 11.3%
15.2% 15.4%
15.5% 15.5%
8.6% 8.6% 8.6% 8.6%
6.3% 6.4% 6.4% 6.4%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2000 2005 2010 2015 2020 2025
千代田区
港区
中央区
新宿区
渋谷区
Chiyoda and Minato have been increasing their share of office workers, while Chuo and Shibuya have been flat and Shinjuku has been losing share
Trend of office worker share in Tokyo’s CBD (23 wards =100%)
Office Market
Minato
Shibuya
Chuo
Chiyoda
Shinjuku
Source: MIC “Population Census” and Tokyo Metropolitan Government “Shugyosha no Yosoku”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 38
56 55
83
100108104
114118
183
92
119
74
99
36
72
91
125
216
121
77
154
119
65
86 85
117
175
58
87
10997
73
140
97
163
40
0
10
20
30
40
50
60
70
0
50
100
150
200
250
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
# of buildingsSupplied f loor area
(1,000 ㎡)
Office supply area
Number of building supplied
Office space supply in Tokyo’s 23 wards
Source: Mori Building Company “Market Trend Survey of Large-Scale Office Buildings in Tokyo's 23 Wards”
Office market
Despite the dwindling number of office workers, new office supply will likely continue to grow.
forecast
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 39
Tokyo office market cap rate trend
Source: Japan Real Estate Institute “Real Estate Investor’s Survey”
Office market
The cap rates have continuously been declining since 2012, and it has reached to the lower level of in 2007.
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
Oct
-03
Apr-
04O
ct-0
4Ap
r-05
Oct
-05
Apr-
06O
ct-0
6Ap
r-07
Oct
-07
Apr-
08O
ct-0
8Ap
r-09
Oct
-09
Apr-
10O
ct-1
0Ap
r-11
Oct
-11
Apr-
12O
ct-1
2Ap
r-13
Oct
-13
Apr-
14O
ct-1
4Ap
r-15
Oct
-15
Apr-
16O
ct-1
6Ap
r-17
Chiyoda(Marunouchi) Chuo(Nihonbashi) Minato(Toranomon)
Shinagawa Shinjuku Shibuya
ShinjukShinagawaShibuyaMinato(Toranomon)Chuo(Nihonbashi)Chiyoda(Marunouchi)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 40
8,000
10,000
12,000
14,000
16,000
18,000
20,000
22,000
24,000
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
(yen/tsubo)
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Office rent trend in ex-Tokyo market
Source: Miki Shoji Co., Ltd.
Office market
The vacancy rates have also been recovering in the local office market. However, the number of rent has not increased so much.
Office vacancy trend in ex-Tokyo market
Sendai
Fukuoka
NagoyaYokohama
SapporoOsaka
Tokyo
Tokyo
OsakaNagoyaYokohamaFukuokaSendaiSapporo
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 41
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Oct
-03
Apr-
04O
ct-0
4Ap
r-05
Oct
-05
Apr-
06O
ct-0
6Ap
r-07
Oct
-07
Apr-
08O
ct-0
8Ap
r-09
Oct
-09
Apr-
10O
ct-1
0Ap
r-11
Oct
-11
Apr-
12O
ct-1
2Ap
r-13
Oct
-13
Apr-
14O
ct-1
4Ap
r-15
Oct
-15
Apr-
16O
ct-1
6Ap
r-17
Ex-Tokyo office market cap rate trend
Source: Japan Real Estate Institute “Real Estate Investor’s Survey”
Office market
Liquidity is growing in ex-Tokyo as well as the real estate investment market rises and becomes overheated.
As property acquisition becomes more difficult in Tokyo, investment money must look to regional markets.
SendaiSapporoFukuokaNagoyaYokohamaOsaka
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 42
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 43
Residential market
About 20% of all households in Japan are living in non-public rental apartments, and the percentage is trending upwards.
Households living in non-public rental apartments (excluding wooden apartments; hereafter the same in this section), which numbered 3.34 million in 1988, increased by about 2.6 times to 9.96 million (about 20% of all households) in 2013.
Source: MIC “Housing and Land Survey”
3,7604,097
4,4214,716
4,9895,238
1,411 1,578 1,682 1,724 1,783 1,857
334 490 650 750 879 996
9%
12%
15%16%
18%20%
0%
5%
10%
15%
20%
25%
0
1,000
2,000
3,000
4,000
5,000
6,000
'88 '93 '98 '03 '08 '13
Ratio of Households Living in Private Rental &
Apartm
ent House (non-w
ood)
Num
ber o
f Hou
seho
lds (
unit:
10,0
00)
Households Living in HousingHouseholds Living in Rental HousesHouseholds Living in Private Rental & Apartment Houses (non-wood)Ratio of Households Living in Private Rental & Apartment Houses (non-wood)
Own House63%
Private Rental House,
Apartment House (non-
wood)20%
Private Rental Housing, Others
9%
Public Rental House
6%
Company Housing
2%
Breakdown of all households by housing type (2013) Number of households by housing type 1988 - 2013
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 44
Residential market
The total number of moving households has decreased, but the ratio of households moving to non-public rental apartments is trending upwards.
The number of moving households peaked out in 1994-98 and decreased to about 77% of the peak-time level in 2009-13 . The number of households moving to non-public rental apartments is also on a decreasing trend, although its ratio to the total number
of moving households is trending upwards.
Housing choices of moving households 1984 - 2013
1,1031,186 1,221
1,1351,039
939
782884 868
778698
639
427532 557 502 466 447
39%
45% 46% 44% 45%48%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0
200
400
600
800
1,000
1,200
1,400
1,600
84-88 89-93 94-98 99-03 04-08 09-13
Ratio of Households Living in Private Rental &
Apartm
ent Houses
Num
ber o
f Mov
ing
Hou
seho
lds
(Uni
t:10,
000)
Number of Moving Households in Past 5 YearsNumber of Households Moved into Rental HousesNumber of Households Moved into Private Rental (Apartment) HousesRatio of Households Moved into Private Rental (Apartment) Houses
Source: MIC “Housing and Land Survey”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 45
Residential market
The majority of households moving to non-public rental apartments moved within the same city.
Looking at the former locations of households moving into non-public rental apartments in seven major cities, those that moved within the same city were greater in number than those that moved in from outside the city.
Tokyo’s 23 wards and Osaka saw a decline in households moving into non-public rental apartments from outside the city, while major regional cities saw no change.
Location choices of moving households
28 30 28 31 32 28 27 33
165 157 148 13756 57 55 55 73 61 53 50 27 27 23 22 47 46 41 48
50 46 48 55 25 24 24 27
266207 197 200
58 54 51 58105
86 77 7336 37 32 30
45 47 49 54
0
50
100
150
200
250
300
350
400
450
500
94-9
899
-03
04-0
809
-13
94-9
899
-03
04-0
809
-13
94-9
899
-03
04-0
809
-13
94-9
899
-03
04-0
809
-13
94-9
899
-03
04-0
809
-13
94-9
899
-03
04-0
809
-13
94-9
899
-03
04-0
809
-13
Sapporo Sendai Tokyo 23 Wards
Nagoya Osaka Hiroshima Fukuoka
Brea
kdow
n of
In-F
low
Hou
seho
lds M
oved
inPr
ivat
e Re
ntal
Hou
ses (
non-
woo
d) (U
nit:1
,000
)
Household moving in a cityHousehold moving out a city
Source: MIC “Housing and Land Survey”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 46
Residential market
The supply of non-public rental apartment units has increased more sharply than total housing stock.
The growth of rental apartments (public and non-public combined) outpaced the growth of overall housing as well as the more modest rise of rental housing in general.
As a result, the ratio of rental apartments to total rental houses increased from 60 to 70%.
Housing stock by type 1988-2013
Source: MIC “Housing and Land Survey”
Housing growth rates by type
39 44
50 54
58 61
16 18 20 21 22 23
12 14 15 16
0
10
20
30
40
50
60
70
'88 '93 '98 '03 '08 '13
Hous
ing
Stoc
k (U
nit:1
mill
ion)
Number of HousesNumber of RentalHousesNumber of Rental & Apartment Houses (non-wood)
100
107
114
119
103 108
112 112
124
130
80
90
100
110
120
130
140
'98 '03 '08 '13
Grow
th R
ate
(198
8 =
100)
Number of HousesNumber of RentalHousesNumber of Rental & Apartment Houses (non-wood)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 47
In 2016, the number of new construction housing increased by 58,000 houses since 2015 and reached to about 97000 houses. The number of new construction for rental houses increased by about 40,000 houses from 2015 to 2016.
Residential market
The number of new constructions for rental houses keeps increasing.
New housing supply trend: 1991-2016 Breakdown of new rental housing construction by region
Source: MLIT “Survey of Construction Work Started”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 48
The construction of rental apartment increased for avoiding tax with the basic deduction's of an inheritance tax being reduced from January, 2015.
Because of number increasing in apartment supply due to the factors besides the actual demand, vacancy rates increased suddenly centering on the suburb part with the high apartment ratio occupied in a rental apartment.
Residential market
Since 2015, the vacancy rates in Kanagawa prefecture have gone up suddenly.From the end of 2016, the vacancy rates are rising in Tokyo as well.
Vacancy Rates of Rental Housing (non-wood) in Major Cities
Source: TAS Corp. and At Home Co., Ltd. “Report on Rental Housing Market”
Vacancy Rates of Rental Housing in Tokyo Metropolitan Area
Source: MIC “Housing and Land Survey”
0%
5%
10%
15%
20%
25%
Sapporo Sendai Tokyo23 Wards
Nagoya Osaka Hiroshima Fukuoka
Vaca
ncy
Rate
of R
enta
l Hou
sing
(non
-woo
d) (U
nit:
%) '98 '03 '08 '13
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 49
Residential market
Rent standard is still on a declining trend.
The rent level of non-public rental housing rose steadily from 1990, after which it gradually declined since 2000. This trend has continued not even changed recently.
Source: MIC “Consumer Price Index”
Rents in the private sector (annual average) – nationwide and central Tokyo
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 50
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Jan
May Sep
Jan
May Sep
Jan
May Sep
Jan
May Sep
Jan
May
2012 2013 2014 2015 2016
Mon
thly
Ren
t Lev
el (U
nit:
Yen/
m2 )
Tokyo 3 centraldistrictsTokyo 23 districts
Nagoya city
90%
92%
94%
96%
98%
100%
Jan
May Sep
Jan
May Sep
Jan
May Sep
Jan
May Sep
Jan
May
2012 2013 2014 2015 16年
Occ
upan
cy R
ate
(Uni
t:%)
Tokyo 3 centraldistrictsTokyo 23 districts
Nagoya city
The operating ratio of Nagoya city and Fukuoka city hits the ceiling. The rent standard remains stable or decrease.
Residential market
The operating ratio of REIT case housing and the private placement fund has been at the highest level, and the rent standard in downtown 3 ward and Tokyo 23-ku‘s has continue to rise slowly.
Occupancy rates of REIT-owned and private fund-owned properties Monthly rents of REIT-owned and private fund-owned properties
Source: Association for Real Estate Securitization of Japan “ARES J-REIT Property Database”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 51
Residential market
The rate of housing ownership, which has a negative impact on rental housing demand, has shown a downward trend with the 40-49 age group.
Housing ownership rate in Japan by age group
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1998 2003 2008 2013
70+
60-69
50-59
40-49
30-39
-29
Source: MIC “Housing and Land Survey”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 52
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 53
Retail property market
The number of locations for large stores has been on a downtrend in recent years.
New retail space supply vs. number of development projects
Note: The reported numbers for the fiscal years 2002 and 2008 include stores without floor space indication.Source: METI “Large-scale Retail Chain Site Expansion Report”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 54
30.6 30.4 31.5 33.1 34.6 36.5 38.0 42.1 42.7 44.2 45.7 46.4 47.9 49.8 50.8 51.7
11.8 11.6 12.1 12.4 12.8 13.2 13.6 14.1 14.2 14.5 14.8 15.0 15.3 15.7 15.9 16.1
0
2
4
6
8
10
12
14
16
18
0
10
20
30
40
50
60
70
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Floor area per shopping centerO
vera
ll flo
or a
rea
(year)
Overall floor area Floor area per SC(in 1 million m2) (in 1000m2/store)
Retail property market
For shopping centers, the total floor area for all stores and the floor area per store are both on the rise.
Overall floor area and per-store floor area for shopping centers
Note: In the old SC standard, only shopping malls with more than 10 retail tenants were considered.In the new SC standard, the shopping center must have more than 10 tenants including food stalls, service centers and retail outlets.On the same note, the shopping center must have more than 1,500 m2 retail space.
Source: Council of Shopping Centers “SC White Book”
Old SC Standard
New SC Standard
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 55
Retail property market
In 2016, the annual sales of existing shopping centers declined -1.1% compared to the previous year.
YoY comparison of existing shopping centers’ annual sales
Source: Council of Shopping Centers “Overall Sales Statistics Report”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 56
Retail property market
Abenomics has not changed consumer outlook dramatically.
Consumer outlook index chart
Source: Cabinet Office “Consumer Trends Survey”
Note: Consumer outlook index calculation methodology:
Consumers are asked to rate their outlook for the next 6 months for the following 4 categories: “Lifestyle”, “Income”, “Job environment” and “Determining when to purchase consumer durables” using a 5-scale index.
Each of the 5 scales is assigned a value: +1 for “Will get better,” +0.75 for “Will get somewhat better,” +0.5 for “Won’t change,” +0.25 for “Will get somewhat worse,” and +0 for “Will get worse”. This numerical index is used to provide a component ratio for each of the answers, from which the results are calculated.
To illustrate, a value of 50 will be produced if all participants answer “Won’t change” for all available items.
▼ Dec. 2012Liberal Democratic Party
becomes the ruling party again
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 57
Retail property market
Compared to other areas, rent levels in Ginza, Omotesando, and Shinjuku are still high.
1st floor rent ranking in 13 principal business areas (yen/month/tsubo)
Source: Japan Real Estate Institute, BAC Urban Projects, and Attractors Lab “Retail Chain Rental Trends”Note1: Rent in Yokohama is shown to have spiked in the early half of 2012, but this can be attributed to the extremely small sample sizeNote 2: Rent in Shinjuku is shown to have spiked in the late half of 2012, but this can be attributed to a sample bias toward small, high-rent propertiesNote 3: Rent in Ikebukuro is shown to have dived in the early half of 2013, but this can be attributed to a sample bias toward low-rent properties in unfavorable locations
Tokyo Metropolitan
Area
Provincial Areas
※2
※1 ※3
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 58
Retail property market
Cap rates have been falling from around 2011, and hit a record low in metropolitan Tokyo.
Commercial establishment cap rates (expected yield)
Source: Japan Real Estate Institute “Real Estate Investor’s Survey”
Definition:Metropolitan high-class specialty stores:
Length of time after construction -or- large-scale repair/improvement: less than 5 years
Tenants: Mainly retailers of high-class brands.Rent system: Mainly fixed-term, variable rental schemes based on the
revenue.Areas: Along Chuodoori in Ginza’s Chuo district.
Along Omotesando in Shibuya’s Omotesando district.
Suburban shopping centers:Sales floor area: around 20,000m2
Key tenants: Prominent general merchandise stores (GMS)Rent system: Mainly fixed-term, fixed-charge rental schemesAreas: Along main thoroughfares within about an hour from
metropolitan Tokyo.
Stores for areas outside Tokyo follow similar locational conditions as above.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 59
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 60
Logistics property market
The truck-based transport volume (in tons), which forms the bedrock of Japan’s cargo industry, has continued to decline in recent years.
Truck-based (automobile) transport is the primary transport method that constitutes a large share of Japan’s freight traffic. In recent years, the volume of cargo transported via automobile has declined due to the downturn in the quantity of trucks sold for
private use.
Cargo quantity by transport method (FY2014) Automobile cargo quantity movement
Note: The chronological continuity of data from prior to 2009 could not be guaranteed due to the changes made to the tallying methodology in the middle of 2010.Source: MIC “Transport quantity by transport method” and MLIT “Automobile Transport Statistics Survey”
(Unit: 1 million tons)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 61
As the movement to smaller logistics lots progresses across the whole industry, the quantity distributed has increased to a yearly rate of 4.0% based on the number of reported instances.
The increased quantity of distribution in warehouses is remarkably high. This increase is propelled by the increase in distribution quantity using small lots that are less than 0.1 tons.
Logistics property market
As the movement to smaller logistics lots progresses, the quantity distributed in such lots appears to be in upward trend based on the number of instances.
Industry-wide (except warehousing) distribution quantity by lot size(unit: number of instances)
Warehousing distribution quantity per lot size(number of instances)
Source: MLIT “Logistics Census”
CAGR4.5%
CAGR3.7 %
CAGR7.3%
CAGR12.6%
CAGR-5.3 %
CAGR-1.4%
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 62
Logistics property market
Small-lot consignments increase, due partly to the expansion of e-commerce, which is expected to continue growing hereafter.
Market size of Business-to-Consumer e-Commerce is expected to surpass 20 trillion yen in 2019.
Market size of B-to-C e-Commerce
Note: Business -to-consumer e-commerce: sale of products and services to consumers in general via the InternetSource: NRI
0
5
10
15
20
25
30
202120202019201820172016201520142013
(trillion JPY)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 63
The number of supplied warehouse buildings fell to roughly 23% of the peak level in 1991 (12,000 buildings/year) which has stabilized in recent years.
The number of supplied warehouse buildings for the transport industry is dwindling at a more relaxed pace compared to the rest of the industry (see figure below left), but the floor space per building is on an upward trend (below right).
This explains the increased need for SCM support for generic enterprises and new/large-scale logistics facilities for logistics consolidation.
Logistics property market
While new supply has stopped dwindling, facilities are growing larger due to businesses consolidating their logistics capabilities.
Nationwide number of supplied warehouses including warehouses for transport and transport industry share
Floor space per warehouse building
Source: MLIT “Construction Statistics”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 64
Logistics property market
In response to the growing demand of logistics used by e-commerce, the volume of order to build warehouses/logistics facilities has been increasing.
Order volume for construction of warehouses/logistics facilities by ordering industry
Note: Only contracts worth 500 million yen and above are includedSource: MLIT “Construction Order Trends, Statistics and Survey”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 65
Logistics property market
Major foreign-based logistics property players and Japanese real estate developers are gearing up for roadside development ahead of new expressway construction.
Narita Airport
Haneda Airport
Ken-OEXPWY
Gaikan EXPWY
Joban EXPWY
ChuoEXPWY
Tomei EXPWY
ExpresswayExpressway (planned)New devts
28
Source: Compiled by NRI from companies’ respective websites
22
29 30
16
25
02
18
21
2623
14
11
12
31
05
13
04
24
03
06
17
15
1009
08
27
07
1920
Kan-etsuEXPWY
Tohoku EXPWY
MFLP Prologis Park Kawagoe01
Logi-Square Kawagoe03
Prologis Park Higashi-Matsuyama04
Hasuda Logistics Center05
Logi-Square Kasukabe06
Kuki Distribution Center07
DPL Satte
Prologis Park Furukawa 3
GLP Goka
08
09
10
MUCD Kawasaki 1 extension11
SOSiLA Yokohama-Kohoku12
Prologis Park Ebina 213
MUCD Zama14Logiport Sagamihara 2GLP Sagamihara Project15
MFLP Atsugi 216MFLP Atsugi 3Hiratsuka Higashi-Yawata L. Center17
Tokyo Railgate East18Distribution B Bldg.DynaBASE19
MFLP Haneda20
MFLP Kawasaki 121
DLP Kawaguchi-RyoukeMFLP Kawaguchi 122
DLP Nagareyama 1GLP Nagareyama 1GLP Nagareyama 2GLP Nagareyama 3
23
Prologis Park Tsukuba 124
MFLP Tsukuba25
DLP Tsukuba-Ami26Goodman Business Park Stage 1Goodman Business Park Stage 227
Prologis Park Ichikawa 3Ichikawa Distribution Center28
MFLP Funabashi 229
Logi-Cross Narashino30
Chiba Wakamatsu-Cho L. Center31
No. Project
MFLP Prologis Park Kawagoe02
01
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 66
# Name of Project Name of Developer Map No. Completion Scale (Total floor area)1 DPL Tsukuba-Ami Daiwa House Industry 26 2017.7 62,567 ㎡ **2 Distribution B bldg. Tokyo Ryutsu Center 19 2017.7 about 171,30 ㎡3 SOSiLA Yokohama-Kohoku Sumitomo Corp. 12 2017.9 about 87,000 ㎡4 Hiratsuka Higashi-Yawata Logistics Center LaSalle Investment Management 17 2017.10 9,690 ㎡5 Prologis Park Ichikawa 3 ProLogis 28 2017.12 64,406 ㎡6 Logiport Sagamihara 2 LaSalle Investment Management 15 2017 Winter 45,500 ㎡7 Prologis Park Ebina 2 ProLogis 13 2017 38,057 ㎡8 MCUD Zama Mitsubishi Corp. Urban Development 14 2018.1 18,200 ㎡9 Goodman Business Park Stage 1 East Goodman Japan 27 2018.1 116,000 ㎡ *10 Goodman Business Park Stage 2 Goodman Japan 27 2018.1 125,000 ㎡ *11 DPL Kawaguchi-Ryouke Daiwa House Industry 22 2018.2 71,448 ㎡12 Prologis Park Higashi-Matsuyama ProLogis 04 2018.2 about 71,348 ㎡13 Logi-Square Kawagoe CRE 03 2018.2 7,453 ㎡14 GLP Nagareyama 1 GLP 23 2018.2 131,236 ㎡15 DPL Nagareyama 1 Daiwa House Industry 23 2018.2 144,005 ㎡16 MFLP Atsugi 2 Mitsui Fudosan 16 2018.3 14,700 ㎡17 MFLP Tsukuba Mitsui Fudosan 25 2018.3 about 25,500 ㎡18 Logi-Cross Narashino Mitsubishi Estate 30 2018.3 about 39,100 ㎡19 GLP Nagareyama 2 GLP 23 2018 95,841 ㎡20 GLP Nagareyama 3 GLP 23 2018.5 93,223 ㎡21 Hasuda Logistics Center ORIX 05 2018 Spring 23,510 ㎡ **22 MFLP Atsugi 3 Mitsui Fudosan 17 2018.6 about 43,400 ㎡23 MCUD Kawasaki 1 Extension Mitsubishi Corp. Urban Development 11 2018.6 48,921 ㎡24 Logi-Square Kasukabe CRE 06 2018.6 22,187 ㎡25 DynaBASE Japan Motor Terminal 19 2018.7 97,000 ㎡26 Prologis Park Furukawa 3 ProLogis 09 2018.8 31,256 ㎡27 Prologis Park Tsukuba 1 ProLogis 24 2018.8 about 70,000 ㎡28 Kuki Distribution Center ESR (ex-Redwood Group) 07 2018.9 155,853 ㎡29 MFLP Prologis Park Kawagoe Mitsui Fudosan/ProLogis 02 2018.10 about 130,800 ㎡30 GLP Goka GLP 10 2018.10 140,000 ㎡31 Ichikawa Distribution Center ESR (ex-Redwood Group) 28 2019.1 229,715 ㎡32 MFLP Kawaguchi 1 Mitsui Fudosan 22 2019.4 about 54,100 ㎡33 GLP Niiza GLP 01 2019 Spring about 31,000 ㎡34 MFLP Haneda Mitsui Fudosan 20 2019.6 about 84,400 ㎡35 MFLP Kawasaki 1 Mitsui Fudosan 21 2019.9 about 41,500 ㎡36 MFLP Funabashi 2 Mitsui Fudosan 29 2019.10 about 225,000 ㎡37 Tokyo Railgate EAST Mitsui Fudosan 18 2021.10 about 161,000 ㎡38 GLP Sagamihara Project GLP 15 After 2022 655000 ㎡39 DPL Satte Daiwa House Industry 08 unknown 115,600 ㎡ **40 Chiba Wakamatsu-cho Logistics Center ITOCHU Corp. 31 unknown about 10,478 ㎡
Note) * Total leasable area, ** Site areaSource: Compiled by NRI from companies’ respective websites
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 67
Logistics property market
While the supply of logistics properties is increasing, vacancy rates are rising since 2016.On the other hand monthly rent offers are also rising in Greater Tokyo.
Monthly rent offers and vacancy rates of logistics properties
Note: Logistics facilities which have a total lot area or total floor area of 10,000m2Source: Ichigo Real Estate Information Service “Survey on the Logistics Facilities Rental Market”
Rent offer
Vacancy rates
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 68
Logistics property market
Cap rates have been falling since 2012, with Tokyo hitting all-time low.
Single tenant Multi-tenant
Note: Single tenant: 2-3 floors; total floor area of around 10,000m2
Multi-tenant: 3-4 floors; total floor area of around 50,000m2
Source: Japan Real Estate Institute “Real Estate Investor’s Survey”
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 69
Macro fundamentals of Japan
Overview of real estate investment market in Japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 70
15.4 14.8 15.0 15.4 13.9 15.8 15.9
5.1 5.0 4.4 4.84.5
4.6 4.91.1 0.8 1.1 1.4
2.03.5 3.7
21.6 20.6 20.5 21.6 20.423.9 24.6
0.0
5.0
10.0
15.0
20.0
25.0
30.0
'10 '11 '12 '13 '14 '15 '16
Japanese Stay Travel Japanese Day Trip Foreigners Travel
Hotel market
Foreign travelers in 2016 accounted for c15% of total domestic travel expenditure
Domestic travel expenditure in 2016 was the largest in the last 7 years, driven by an increased number of foreigner travelers to Japan.
Trends in domestic travel expenditure
(trillion yen)
Sources: Compiled by NRI from Japan Tourism Agency “Ryokou・Kankou Sho-hi Doukou Chosa” and “Consumption Trend Survey for Foreigners Visiting Japan” data
-Consumption tax increase
-:Great East Japan earthquake
+:depreciation of yen progress
+:”Silver Week”Start
+:the number of national holidays is the most
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 71
318 314 316 320 297 313 323
314 299 297 311298 292 315
632 613 613 631595 605
638
0
100
200
300
400
500
600
700
'10 '11 '12 '13 '14 '15 '16
Stay Travel Day Trip
Hotel market
The number of travelers among Japanese residents has edged sideways.
Cumulative domestic traveler numbers (Overnight Travel/Day Trip)
(Million)
Source: Compiled by NRI from Japan Tourism Agency “Ryokou ・Kankou Sho-hi Doukou Chosa” dataNote: Cumulative domestic traveler numbers do not include foreign travelers to Japan.
Cumulative domestic traveler numbers(by trip objective)
(Million)
372 360 368 383 349 365 386
143 145 138 141134 130 143
117 108 107 107112 109
108
632 613 613 631595 605
638
0
100
200
300
400
500
600
700
'10 '11 '12 '13 '14 '15 '16Sightseeing/Recreations Homecoming/Friend VisitBusiness Trip
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 72
China, 637, 27%
Korea, 509, 21%Taiwan,
417, 17%
Hong Kong, 184,
8%
Thailand, 90, 4%
U.S., 124, 5%
Others, 442, 18%
0.0
10.0
20.0
30.0
40.0
50.0
60.0
'05'06'07'08'09'10'11'12'13'14'15'16'17'18'19'20 '25 '30
China Others
Hotel market
Measured by departure country, Chinese visitors will account for about 53% of the total in 2030.
Conversely, the number of travelers to Japan increased rapidly and reached about 24 million, thanks to the weak yen
and relaxed visa criteria. NRI projects the number of travelers to Japan rising about 50 million in 2030
No. of foreigner travelers to Japan(by departure country)
Sources: Compiled by NRI from (Actual numbers) JNTO(Forecast numbers) UNWTO and UN dataNote: Chinese economy doesn't fall into a panic and remains stable. As premise, Asian tourists choosing Japan as a travel destination rises slightly from the current level owing to relaxed visa standards and LCC expansion.
No. of foreigner travelers to Japan by departure country (2015)
Source: Compiled by NRI from JNTO data
(Million)
←Actual Forecast→
China53.0%
※ Assumes the base scenario below
2,404 Ten thousand
(Ten thousand visitors)
Four neighboring countries in Asia account for about 72%.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 73
106 106 106 103 106 103
61 65 69 68 72 74
160 170 184 194 211 207
62 67 73 75 80 788 9 10 9
26 24417 439 466 474504 494
0
100
200
300
400
500
600
'11 '12 '13 '14 '15 '16
Japanese-Style Hotel Resort HotelBusiness Hotel City HotelLodging House Company/Group Loidging
417 413 432 429 438 423
18 26 33 45 66 71417 439466 474
504 494
0
100
200
300
400
500
600
'11 '12 '13 '14 '15 '16
Domestic Customer Foreign Customer
Hotel market
Viewed by facility type, the rise in foreign travelers is impacting growth in business hotels.
Foreigner visitors accounted for 14.3% of all stays in 2016.This ratio continues to rise in tandem with the increase in overseas visitors
Domestic accommodation(Domestic/Foreign)
(Million)
Source: Compiled by NRI from Japan Tourism Agency “Syukuhaku Ryokou Toukei” data
Domestic stays (by accommodation type)
(Million)
※Business Hotel:Budget Hotel
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 74
Hotel market
The total number of the accommodation facilities remains stable.By type, however, the proportion of hotels continues to rise
Trend in number of guest rooms
Source: Compiled by NRI from MHLW “Report of Health Administration and Services” data
(Thousand rooms)
(Fiscal year)
756 781 798 803 814 815 827 835 846
823 808 792 764 761 741 735 710 702
1,579 1,588 1,590 1,568 1,576 1,556 1,562 1,545 1,548
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
'07 '08 '09 '10 '11 '12 '13 '14 '15
Japanese-Style Hotel Hotel
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 75
1,2021,298
1,4671,639
1,550
2,224
0
300
600
900
1,200
1,500
1,800
2,100
2,400
'11 '12 '13 '14 '15 '16
327 345419 412
547
819
393 448615 675
848
1,822
02004006008001,0001,2001,4001,6001,8002,000
0
200
400
600
800
1,000
'11 '12 '13 '14 '15 '16Number of Ridge(Left Axis)
Floor Space(Right Axis)
Hotel market
Floor space per building is 1.25 times higher than 2011, as large buildings are being built
The number of accommodation facilities and area of floor space both suddenly rose in 2016 owing to a stable economic environment and growing demand for accommodations.
Accommodation facilities※
No of buildings and floor space
Source: Compiled by NRI from MLIT “Statistics on Construction Undertaken” data
Accommodation facilities ※ Floor space per building
※Accommodations assume a hotel.Surveyed buildings are those built with steel framed reinforced concrete, ferroconcrete and steel frame
(Buildings) (thousand ㎡)(㎡)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 76
Hotel market
c16,000 rooms are expected to open in Tokyo over the next 3 years
Operator Area Opening year
Number of rooms
APA Group Akasaka 2018 500Asakusa 2018 306Ueno 2018 124Kanda 2018 142Komagome 2018 143Shinjuku 2018 176Nishi-Shinjuku 2018 710Shintomicho 2018 140Nagatacho 2018 500Nihonbashi-Bakurocho 2018 153Nihonbashi-Bakurocho 2018 193Nihonbashi-Bakurocho 2018 127Otuska 2019 613Shinjuku 2019 166Ryogoku 2019 1065Roppongi 2019 875Higashi-Shinjuku 2020 819Roppongi undecided 670
Mitsui Fudosan Hotel Management
Kanda 2018 190Ginza 2019 330Otemachi 2020 190Toyosu 2020 200Yaesu 2021 undecided
Mitsui Fudosan Gotanda 2018 372Nihonbashi-Muromachi 2018 260
Daiwa Royal Ariake 2018 undecidedShinbashi 2018 undecidedKyobashi 2019 about 200
Main new hotel development projects in Tokyo※ 1/2
Source: Compiled by NRI from Ohta Publications Co., Ltd. ”Weekly HOTERES” dataNote: A hotel development project is chosen as the area where weekly HOTERES investigated.
Operator Area Opening year
Number of rooms
Daiwa House Industry Kanda 2018 113Toyosu 2019 330
Mori Trust Ginza 2020 100Toranomon 2020 about 200Akasaka 2022 undecided
Toyoko Inn Inagi 2018 259Shinjuku-Gyoen 2018 undecided
Daiichi Realter Asakusabashi 2018 undecidedKanda 2018 130Shinonome 2018 undecided
nest Hotel Japan Shinjuku 2018 106Hanzomon 2018 100
Sankei Building Kyobashi 2018 205Ginza undecided undecided
Hulic Ginza 2018 about 160Tsukiji 2018 undecided
ES-CON JAPAN Hayabusacho 2018 102Ginza 2019 190
JR East Japan Railway Company
Akihabara 2019 196Takeshiba undecided 200-300
JR Kyushu Railway Company Shinbashi 2019 267JR West Japan Railway Company Via Inn Iidabashi 2018 295Apple Real Estate Service Akabane 2018 74
Toyosu 2018 65
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 77
Hotel market
c16,000 rooms are expected to open in Tokyo over the next 3 years
Main new hotel development projects in Tokyo※ 2/2
Operator Area Opening year
Number of rooms
Hankyu Hanshin Hotels Kyobashi 2019 270Higashinihon Toshikaihatsu Narihira undecided 43VISTA Hotel Management Akasaka 2018 140Felice Akasaka 2018 167Hotel Keihan Tsukiji 2018 298Manyo Club Toyosu 2019 undecidedCrowded House Area Arrangeing Realization Confarence
Kamata undecided undecided
Mitsubishi Estate Nishi-Asakusa 2018 166Mori Building Daiba undecided undecidedKoen Shoji Ikebukuro undecided 160Yasuda Real Estate Nihonbashi-Hamacho 2018 108Yamaguchi Fudosan Otuska 2018 undecidedYomiuri Shimbun Company Ginza 2019 undecidedRyumeikan Shinbashi 2018 60Route Inn Japan Asakusabashi 2018 200Royal Park Hotels & Resorts Ginza 2019 125Lotte Kasai undecided undecidedMeitetsu Inn Ginza 2018 223Super Hotel Ginza 2019 undecidedTachihi Holdings, Nippon View Hotel Tachikawa undecided undecidedTexas Ginza 2018 105Tokyu Hotels Shibuya 2018 180Keikyu EX Inn Hamamatsucho 2019 135
Operator Area Opening year
Number of rooms
NREG Toshiba Building Ueno 2018 undecidedAihara Building Nihonbashi undecided 119Asahi Shimbun Company Ginza 2018 164Inutsuka Manufacturing Shinagawa undecided undecidedMG Leasing Omori 2018 300Kyoritsu Maintenance Ginza 2019 undecidedGreat Eagle Holdings (Hong-Kong) Roppongi undecided 270Keihan Electric Railway Ginza 2019 undecidedCosmos Initia Ueno 2018 undecidedSamty Nihonbashi-Nakasu 2018 undecidedJST Iriya 2018 undecidedJUJapan Asakusabashi 2018 undecidedMitsui Fudosan Kasumigaokacho 2019 undecidedSumitomo Realty & Development Haneda 2020 154SENKO Group Holdings Shiomi 2019 230Sotetsu Inn Kanda 2018 115Daiwa Land Okachimachi 2018 63Tsukada Global Holdings Nishi-Shinjuku 2019 180Tokyu Corp Daikanyama 2018 undecidedTokyu Land Takeshiba undecided undecidedTokyo Tatemono Ginza 2018 200TOSEI Ueno 2019 undecidedTOWA-SOGO System Shinjuku 2019 undecidedNakano Ward Nakano 2025 UndecidedNomura Real Estate Development Nishi-azabu 2022-24 undecided
Source: Compiled by NRI from Ohta Publications Co., Ltd. ”Weekly HOTERES” dataNote: A hotel development project is chosen as the area where weekly HOTERES investigated.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 78
Hotel market
Over 10,000 rooms are expected to open in Osaka as well over the next 3 years
Operator Area Opening year
Number of rooms
Jowa Holdings Osaka 2018 220Osaka 2018 225Osaka 2018 130Osaka 2019 291Osaka 2021 487
APA Group Osaka 2018 240Osaka 2019 917
Daiwa House Industry Osaka 2018 undicidedOsaka 2019 undicided
Daiwa Resort Osaka 2018 150Osaka 2018 223
Sotetsu Inn Osaka 2018 244Osaka 2018 176Osaka 2019 276
AB Hotel Osaka 2019 168JR West Japan Railway Company Via Inn Osaka 2018 88JR West Japan Railway Hotel Development Osaka 2018 400WBF Izumisano 2020 813Osaka Prefecture Osaka 2019 undicidedORIX Group Osaka undicided undicidedKyoritsu Maintenance Osaka 2018 undicidedKeihan Electric Railway Osaka undicided undicidedKuretakeso Osaka 2018 110Sanco Inn Osaka 2018 115Ship Healthcare Holdings Suita undicided undicidedSumitomo Warehouse Osaka undicided about 300
Main new hotel development projects planned in Osaka prefecture※
Note: A hotel development project is chosen as the area where weekly HOTERES investigated.
Source: Compiled by NRI from Ohta Publications Co., Ltd. ”Weekly HOTERES” data
Operator Area Opening year
Number of rooms
Tokyo Tatemono Osaka 2018 300Toyoko Inn Osaka 2018 undicidedNippon View Hotel Osaka 2018 170Japan Unist Osaka 2018 undicidednest Hotel Japan Osaka 2019 250Pacifica Capital Osaka 2018 185Hankyu Hanshin Hotels Osaka 2019 250Felice Osaka 2018 216Bellco Namba 2019 150Hoshino Resort Group Osaka 2022 608Hotel Monterey Osaka 2018 undicidedMitsubishi Estate Osaka 2018 216Yodobashi Camera Osaka 2019 1000Route Inn Japan Kishiwada 2018 210Royal Park Hotels & Resorts Osaka 2020 352Waqoo Project Osaka undicided undicidedFJHotels Osaka 2019 200Tokyu Hotels Osaka 2019 350
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 79
84 79
71 71 70 68 68 67 66 66 64 62 61 59 58 58 58 57 57 57 56 55 54 54 53 53 52 52 52 51 51 51 51 51 50 50 49 49 48 47 46 46 45 44 41 41 36
0102030405060708090
100
Osa
kaTo
kyo
Chib
aKy
oto
Aich
iFu
kuok
aKa
naga
wa
Saita
ma
Oki
naw
aIs
hika
wa
Hiro
shim
aHo
kkai
-do
Miy
agi
Hyog
oYa
mag
uchi
Nag
asak
iSh
iga
Shim
ane
Oka
yam
aKu
mam
oto
Toya
ma
Saga
Shizu
oka
Kaga
wa
Ehim
eO
itaIw
ate
Fuku
shim
aM
iyaz
aki
Kago
shim
aIb
arak
iGi
fuTo
ttor
iTo
kush
ima
Gunm
aM
ieAo
mor
iTo
chig
iW
akay
ama
Yam
anas
hiKo
chi
Yam
agat
aAk
itaN
ara
Fuku
iN
igat
aN
agan
o
Hotel market
Occupancy rates at hotels in Osaka and Tokyo have risen to c80% are approaching full capacity.
Guest room occupancy rates vary widely by prefecture
Source: Compiled by NRI from Japan Tourism Agency “Syukuhaku Ryokou Toukei” data
Average occupancy rate by prefecture
(%)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 80
48
89 85 88
6276
84 81
4754
85 88
29
6476 82
32
55
77 80
0102030405060708090
100
Japa
nese
-Sty
le H
otel
Reso
rt H
otel
Busin
ess H
otel
City
Hot
el
Japa
nese
-Sty
le H
otel
Reso
rt H
otel
Busin
ess H
otel
City
Hot
el
Japa
nese
-Sty
le H
otel
Reso
rt H
otel
Busin
ess H
otel
City
Hot
el
Japa
nese
-Sty
le H
otel
Reso
rt H
otel
Busin
ess H
otel
City
Hot
el
Japa
nese
-Sty
le H
otel
Reso
rt H
otel
Busin
ess H
otel
City
Hot
el
Osaka Tokyo Chiba Kyoto Aichi
Hotel market
Looking at the type of accommodation in the top 5 prefectures, the occupancy rates in hotels often exceeds 70%.On the other hand, the occupancy rates of Japanese-style inns is less than 50% excluding the Tokyo area.
Average occupancy rate in top 5 prefectures (by type of accommodation)
Source: Compiled by NRI from Japan Tourism Agency “Syukuhaku Ryokou Toukei” data
(%)
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 81
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1月 5月 9月 1月 5月 9月 1月 5月 9月 1月 5月 9月 1月 5月 9月 1月 5月 9月 1月 5月 9月
10年 11年 12年 13年 14年 15年 16年
Month
ly r
ent
stan
dar
d
Unit: y
en/ts
ubo※
23 wards of Tokyo Nationwide
Hotel market
Hotel REIT earnings are expanding due to high occupancy rates
Rents at hotel REITs
Source: Compiled by NRI from ARES “J-REIT Property Database” data.
Note: 1tsubo=About 3.3㎡
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 82
Macro fundamentals of Japan
Overview of real estate investment market in japan
Office market
Residential market
Retail property market
Hotel market
Logistics property market
Real estate investment products
Population movements in Japan
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 83
16.2 15.6
2.2
15.7
0.0 0
4
8
12
16
20
Listed REIT Private Fund Private REIT RMBS CMBS
(¥tn)
Unlisted open-ended private REITs were offered in November 2010, and the size of the private REITs market is growing rapidly.
Real estate investment instruments
An overall perspective of the Japanese real estate market
Equity type Debt type
Listed Unlisted
Close-ended Open-ended
Residentialmortgage
Commercialmortgage
Overview of real estate investment instruments in Japan and AUM
Note: Listed REIT figure is updated as of end of Jun 2017, private fund figure is updated as on end of Dec 2016, private REIT figure is updated as of end of Jun 2017, RMBS/CMBS figure is updated as of end of Mar 2017.
Sources: Compiled by NRI from Association for Real Estate Securitization, Sumitomo Mitsui Trust Research Institute Co., Ltd., and the Japan Securities Dealers Association data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 84
J-REITs began trading on the stock market in September 2001 with two companies and a market capitalization of 250 billion yen.
As of end of July 2017, there were 58 J-REITs traded worth approximately 11.6 trillion yen.
Real estate investment products
Launched in September 2001, J-REIT market capitalization has reached approximately 12 trillion yen.
J-REIT market cap and number of J-REITs
Source: Compiled by NRI from ARES “ARES J-REIT Databook” data.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 85
Real estate investment products
c75% of real estate owned by J-REITs is in the Tokyo metropolitan area. In recent years, J-REITs have become more diversified in type of property owned, and a healthcare REIT was
launched in November 2014.
c75% of J-REIT assets are located in the Tokyo metropolitan area and 45% are portfolios of office properties.
Asset mix of J-REITs by area and asset class
Greater Tokyo Area73.0%
Approx.16.2
trillion yen
Approx.16.2
trillion yen
Source: Compiled by NRI from ARES data
Note: As of the end of June 2017
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 86
The TSE REIT index dropped sharply from its peak in May 2007, but has recovered rapidly from late 2012.
Real estate investment products
The TSE REIT index surged in late 2012 and remain firm.
TSE REIT Index, TOPIX, and the TOPIX Real Estate Sector Index
Source: Compiled by NRI from Thomson Reuters data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 87
Yield spreads are currently around 4%
Real estate investment products
J-REIT dividend yields rapidly increased to around 8%, but are currently down to around 4%.
J-REIT dividend yield and JGB 10-year yield
Sources: Compiled by NRI from Thomson Reuters and MoF data
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 88
According to the index based on actual performance of core funds invested in domestic real estate, the performance of real estate investments in Japan recovered to positive territory in terms of capital return and has been firm since.
Real estate investment products
Capital return is firm.
ARES Japan Property Index (AJPI) and ARES Japan Fund Index (AJFI)
Sources: Compiled by NRI from ARES “ARES Japan Property Index” and “ARES Japan Fund Index” data.
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 89
9,743
14,81516,935
32,44730,260
21,282
16,276 16,81112,217
7,93511,113
8,787 8,34111,287
15,06412,030 11,148 9,894 10,760 9,465 8,235
10,42513,562 13,614
17,83415,423
3,470
1,994
6,937
4,234 7,418
7,352
8,7559,879
1,964
1,303
980
45 138
258
563
0 1400 5
00
0
0 10
04
0
10,000
20,000
30,000
40,000
50,000
60,000
20041stHalf
20042ndHalf
20051stHalf
20052ndHalf
20061stHalf
20062ndHalf
20071stHalf
20072ndHalf
20081stHalf
20082ndHalf
20091stHalf
20092ndHalf
20101stHalf
20102ndHalf
20111stHalf
20112ndHalf
20121stHalf
20122ndHalf
20131stHalf
20132ndHalf
20141stHalf
20142ndHalf
20151stHalf
20152ndHalf
20161stHalf
20162ndHalf
(¥100m)
RMBS CMBS CDO Lease Consumer Loan Shopping Credit Accounts receivable/Commercial Bills Others
Real estate investment products
Most recently, about 75% of residential mortgage-backed securities were originated by the Japan Housing Finance Agency.
CMBS issuance has decreased drastically since 2008, and at present only RMBS are issued on a ongoing basis.
Asset backed securities breakdown by type of backing and RMBS breakdown by originator
Source: Compiled by NRI from Japan Securities Dealers Association data
0% 20% 40% 60% 80% 100%
2004FY 1H2004FY 2H2005FY 1H2005FY 2H2006FY 1H2006FY 2H2007FY 1H2007FY 2H2008FY 1H2008FY 2H2009FY 1H2009FY 2H2010FY 1H2010FY 2H2011FY 1H2011FY 2H2012FY 1H2012FY 2H2013FY 1H2013FY 2H2014FY 1H2014FY 2H2015FY 1H2015FY 2H2016FY 1H2016FY 2H
Housing Finance Agency Banks/Trust Banks Regional Banks Non-bank Others
Copyright(C) Nomura Research Institute, Ltd. All rights reserved. 90
Authors
Contact:Nomura Research Institute, Ltd.Consulting [email protected]
亀井 敬太Keita KAMEIConsultantSection in Charge
Office market, Retail property market, Real estate investment productsExpertise
Real estate, residential loan and infrastructure business strategy and research.
村上 慧悟Keigo MURAKAMIConsultantSection in Charge
Hotel marketExpertise
Residential, real estate and inbound business strategy and research.
荒木 康行Yasuyuki ARAKIConsultantSection in Charge
Macro fundamentals of JapanExpertise
Real estate, urban infrastructure business strategy and research. Especially, International market research, business planning and entry support.
大道 亮Akira DAIDOConsultantSection in Charge
Overview of real estate investment market in Japan, Residential market, Logistics Property marketExpertise
Residential, real estate and energy business strategy and research.
沼田 悠佑Yusuke NUMATAConsultantSection in Charge
Population movements in JapanExpertise
Real estate and energy business strategy and research. In addition, industrial policy planning and monitoring.